For Perry, it’s land transactions, political ties

AUSTIN — During two decades of full-time government service, Gov. Rick Perry has accumulated a net worth of about $1 million - perhaps through good investment timing.

However, almost everyone who steered Perry to his money-making deals has seen rewards from Texas government.

Six received key state government appointments or jobs. Two benefited from government actions that had the potential to enhance their real estate holdings. Another was poised to get a state grant for his business until the deal fell through.

The bottom line is, all of the real estate deals that made Perry money occurred because of an insider's tip. The profits mostly go into a blind trust outside of public view or scrutiny.

"Every transaction I have been involved in has been at arms length, has been transparent and it has been reported on so many cotton-picking times that, if there was something there, it would have been reported on," Perry said recently.

Jillson said numerous politicians have gotten opportunities to make money that would not be available to "the average guy on the street." And in Perry's case, from service in the Air Force to becoming governor, Jillson said Perry rarely has had a private sector job, so "where'd that money come from? He's either frugal as hell or he had somebody bring a step-stool because he got the high fruit."

But will it hurt Perry in this campaign? Probably not, Jillson said, because most of the deals are old news: "It's pretty tough to turn old news into outrage."

Controversy has surrounded Perry's investments for years, and Democratic gubernatorial candidate Bill White is hitting them again in this election to portray Perry as a politician in government service for himself.

Demands to come clean

Perry has said he will not debate White until he releases his tax returns for the years he was a deputy U.S. energy secretary.

White said Perry needs to come clean on assets in his blind trust.

"Perry has used his position to secure special deals to become a millionaire while in office," White said. "Whether it is his appointments, or dealings with lobbyists, or his land deals, Perry helps his friends and his friends help Perry, personally and politically."

White said the public knows less about Perry's deals than his own business interests because Perry "hides" his dealings in a blind trust. White said he will not have a blind trust if elected governor.

Perry responded by saying the point of a blind trust is so financial decisions will not affect his policies.

"I have no idea what's in the blind trust, and frankly, I don't want to know," the governor said.

Legally, Perry is not barred from knowing what is in the trust, but officials at the Texas Ethics Commission said since passage of a 2003 law, if a politician with a blind trust knows an asset in the trust, then that asset must be publicly disclosed. Perry set up his trust in 1996.

Before and after the trust was set up, ethical questions on the real estate deals that have made Perry hundreds of thousands of dollars were plentiful.

Horseshoe Bay deal

The most recent controversy involved .56 acres at Horseshoe Bay that never was put into the trust. Perry bought the lot in 2001 through childhood friend state Sen. Troy Fraser, R-Horseshoe Bay, for $300,000, but the actual seller was San Antonio financier Doug Jaffe. Perry sold the lot in 2007 to one of Jaffe's business associates for $1.15 million.

In between, Perry's office approved a $2.5 million grant to an aircraft company that included Jaffe as a founding investor, but the money never was delivered because the company did not meet job-growth commitments.

The Dallas Morning News hired appraisers who said Perry got the land for $150,000 below market and sold it for $350,000 above the market price for comparable real estate.

Perry's aides have contended the appraisals were unfair. Perry said it was a straight real estate transaction.

"Here's what I think most Texans would say: If you bought a piece of property in central Texas, particularly at Lake LBJ in 2001, and you didn't make money on it six years later, we might not want you to be governor. You'd be a pretty rotten business person," Perry said.

However, Perry's aides could not immediately explain why the governor reported a capital gain of $823,766 in March 2007 from the property's sale on his federal income taxes, but his blind trust grew by only $117,000 between December 2006 and December 2007.

Differences in amounts

Perry's office in the past said the profits from the Horseshoe Bay sale went into the blind trust. But the trust ended 2007 with a value of $742,184, an amount substantially less than his gain on the Horseshoe Bay property. The value at the end of 2006 had been $625,322, according to figures supplied by Perry's campaign.

The Horseshoe Bay transaction was similar to a 1993 real estate deal to which Perry was directed by an old friend named Tim Timmerman, an Austin real estate developer, who, like Perry, is a Texas A&M graduate. Timmerman did not respond to requests for an interview.

Timmerman steered Perry into paying $122,000 for a 9.3 acre plot that became critical to the construction of a 33,000-square-foot home being built by computer millionaire Michael Dell. Perry sold the land to Dell two years later at a profit of $343,000.

Timmerman has given almost $69,000 to Perry's campaign funds this decade and serves on his finance committee.

Political connection

In recent years, Timmerman was a focus of a fight in Hutto near Austin, where local residents opposed plans by Oncor and the Lower Colorado River Authority to build high-voltage electric transmission lines through the city.

The citizens preferred putting the lines along the Texas 130 toll road, but that would have meant the eye-sore lines would have been adjacent to land Timmerman planned to use for swank commercial and multi-family development as part of his Star Ranch community.

In 2008, Perry appointed Timmerman to the LCRA board of directors. The LCRA kept its line route away from Timmerman's property, and Perry's appointees on the Public Utility Commission voted down residents' request to re-route the lines to the highway right of way.

Perry described Timmerman as a friend and said there was nothing improper about the real estate tip or the appointment more than a decade later.

"I trust him and he's honest," Perry said. "What better people would you want to serve on boards and agencies than people you know, that you trust and are honest?"

— R.G. RATCLIFFE, Chronicle

For White, it’s allegations of profiteering

Campaigning across Texas day after day, gubernatorial candidate Bill White rarely reminds his audiences that he has been a successful trial lawyer, that he served a stint in Washington as a federal bureaucrat or that he headed the state Democratic Party in the 1990s.

What he invariably points out is that he is a businessman and a former three-term mayor of the nation's fourth-largest city and that the former experience deeply influenced the latter.

He does not bring up the fact that he made millions of dollars in business deals during his six years in office. While not illegal, White's business dealings have left him open to political attacks about how he did it, particularly since some information about his investment success did not surface publicly until after he released his tax records, a move he had resisted .

For months, Gov. Rick Perry has been pounding White over what he calls his opponent's "secret side dealings" during his six-year tenure as mayor, including an accusation that White "profiteered" from the aftermath of Hurricane Rita. He also has accused White of using connections he has forged in government service to reap millions in investment profits.

White has denied any wrongdoing and has accused Perry of enriching himself through sweetheart real estate deals while governor.

Perry's charges have had an effect, said Jerry Polinard, a professor of political science at the University of Texas-Pan American, although he also noted that the electorate traditionally does not really start paying attention until after Labor Day.

"I think, so far, Perry's charge has served to blunt White's attempts to raise ethical questions about Perry profiting from being governor," Polinard said.

Rita allegations

Perry's most serious accusation is that White engaged in profiteering after Hurricane Rita came ashore in 2005.

"By his own admission, Bill White intervened regarding a contract given to BTEC, a company he had personal financial ties with. ... If this is true, and Bill White did unethically steer taxpayer dollars to a company he had a personal financial state in, I am calling on him to immediately resign from the race for governor," Perry said in a statement — and continues to say whenever he is asked about White's business interests.

"By his own admission, Bill White intervened regarding a contract given to BTEC, a company he had personal financial ties with. ... If this is true, and Bill White did unethically steer taxpayer dollars to a company he had a personal financial state in, I am calling on him to immediately resign from the race for governor," Perry said in a statement - and continues to say whenever he is asked about White's business interests.

White's ties to BTEC Turbines became a target for the Perry campaign in June when the former mayor released his tax returns after refusing to do so for months.

Before he became mayor, White served on the board of BTEC; he left the board in 2003 after winning his City Hall post.

After Rita, White recommended the Coastal Water Authority contract with BTEC for backup generators to help restore power to the Lynchberg Reservoir pumping station, which provides water to hundreds of thousands of area residents and numerous refineries.

The authority engaged BTEC and ended up paying the firm $1.8 million, but not before a billing dispute over $160,000 in charges. Both BTEC and the authority appealed to White and several of his City Hall staffers for help resolving the dispute. White insisted he did nothing improper by urging that BTEC be paid for its services. In the end, the two sides settled, but BTEC did not get paid for the disputed portion of its bill.

Eight months later, White was invited to invest in BTEC. He invested $1 million and reported more than $524,000 from the investment on his 2007 tax returns.

White labels all of Perry's charges related to Rita as a smokescreen to avoid a debate on more substantive issues, including a looming budget shortfall of more than $18 billion - a shortfall that, in White's view, will take a businessman's eye for the bottom line to resolve.

As a businessman, White has had both successes and failures in a career centered on energy .

Clinton and the Caspian

In 1991, White met Bill Clinton, then governor of Arkansas, just as Clinton was preparing to run for president. White went on to raise millions for the Clinton campaign and in 1993 was appointed deputy Energy secretary .

Although he contended the U.S. needed to lessen its dependence on foreign imports, he also urged the country's energy producers to develop oil in the Caspian Sea.

He traveled to the Caucasus at least half a dozen times, trying to broker an agreement in a long-running feud between the leaders of Armenia and Azerbaijan, hoping to pave the way for cooperation between the two countries in efforts to open the region for oil production.

Leaving the Energy Department in 1995, White returned to Houston to launch his own company, Frontera Resources. Hoping to extract oil from the Caspian, Frontera signed a production-sharing agreement with the Azerbaijan state oil company.

The venture was not as successful as White had hoped. The production agreement with Azerbaijan fell apart, and Frontera eventually defaulted on a large loan.

Frontera's investors lost millions, which became fodder for Perry's charge that, in addition to taking unfair advantage of connections he made while serving in the Energy Department, White also is an inept businessman (although he did recoup his investment by selling his stock at a $1 million profit).

On board while mayor

Throughout his three terms as mayor, White served on the board of BJ Services, a Houston-based energy services company that specializes in drilling for natural gas. He made more than $2.6 million in total compensation from the company while mayor, most of it in deferred payments for his services on the board. He also owns more than 10,000 shares of BJ Services stock and $245,000 in stock options.

Although Texas law does not prohibit elected officials from serving on company boards, it is relatively unusual. Corporate governance experts the Houston Chronicle contacted in March for a story about White's corporate connections said it was rare for sitting elected officials to serve on the boards of public companies and that it generally would be ill advised. The risk is the appearance of a conflict of interest or an actual conflict.

Earlier this year, BJ Services was bought by Baker Hughes, the oil-field services company. Although White no longer is on the BJ Services board, he still has financial ties to the company.

There is nothing all that unusual in the overlap between business and government, says James Riddlesperger, a political scientist at Texas Christian University.

"Almost anyone coming from local government, or even from the legislature, or anywhere else where the salary is not intended to cover one's income needs, into the governor's election would have the same problem potentially," he said. "I guess that the Rick Perry land deal is comparable - it was just business according to him."